Relative Home Supply Drops In Tallahassee
Every month when we've assembled the updated data on Tallahassee home sales, we create the Leon County Home Inventory Report and make it available for download from the Tallahassee Real Estate Web Site.
This month brings us good news with the relative supply of homes dropping for the first time since January. As we have discussed often times in the past, we always keep an eye on housing inventories and home sales rates in order to understand the current state of supply and demand in the Tallahassee housing market.
When we study housing inventories, we want to know both the absolute home supply as well as the relative home supply.
- Absolute Home Supply – This is the total number of homes for sale in Tallahassee
- Relative Home Supply – This is the number of months of supply of homes for sale in Tallahassee, as measured using the current rate of sales (demand).
Too Many Homes For Sale In Tallahassee
We have been consuming inventory in Tallahassee and both our absolute and relative supply of homes has dropped, but we still have over 14 months of supply of homes for sale in Tallahassee. A balanced market is when we have roughly 6 months of supply, so at 14 we are still in a very strong buyers' market.
As you can tell from the real estate chart above, there is an abundance of homes for sale in each quadrant of the Tallahassee housing market. To understand what this is really saying, imagine that you want to sell your $180,000 home in the Northwest section of Tallahassee. This chart tells us that you would be facing 19.3 months of supply as your competition. In simpler terms this means that if no other homes come on the market, there currently exists enough homes to satisfy current demand for the next 19 months (April of 2011).
Home Supply And Demand History In Tallahassee
On the flip-side of this glut of supply is the lagging demand. While we reported last week that it appears the market has turned, our current demand is at or near the lowest level recorded in the past 20 years. This represents good news in that our current levels of supply would be historically adequate (or even low), so all we need to do is to stimulate demand back to historic "normal" levels.
The following real estate graph shows how our current supply would have appeared with past demand levels. The green line on the graph is the real number of sales posted each month in the Tallahassee MLS, while the yellow line represents market equilibrium at 6.0 months of supply. The red bars show relative supply based upon historic sales and our current inventory.
This graphs shows that our current absolute supply of homes for sale in Tallahassee would have created a buyers' market in 2003, 2004, 2005, 2006 and even 2007! This means that our supply and demand problems stem more from lowered demand than they do from gross over-supply and a return in our historic "norm" should help the market immensely.
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Joe Manausa is a real estate blogger, a real estate investor and the Broker and Co-Owner of Joe Manausa Real Estate. He can be reached via e-mail through the Tallahassee Real Estate Website or catch his latest writings on the Tallahassee Florida Real Estate Blog , or by calling (850) 386-2001.
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I'd like to hear your thoughts as to whether there is a substantial "shadow inventory" of homes in Tallahassee at the moment? By shadow inventory I mean housing units that are not making it onto the public market for one reason or another. Many of these may be REO units that banks are currently unwilling to put on the market as they will have to accept a write-down. There may also be a substantial number of homeowners who have simply decided to pull homes off the market waiting for conditions to improve. As to the former question, I'm wondering if it's possible to compare the reported number of homes entering foreclosure, versus the overall numbers of REO homes that actually make it onto the MLS.
As always keep up the good work!
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